Interest rate cuts unlikely before August, economists warn

When the Bank’s MPC met in March, just one member voted for interest rates to be cut while the remaining eight voted for no change to come down. At the end of last year there were forecasts interest rates would start to be lowered by the end of spring but expectations have since been set back by months.

She said: “While core inflation remains relatively elevated, the trend is certainly downward for core and headline inflation, with the latter expected to reach the Bank of England’s target very shortly. “The forecasts in this week’s monetary policy report are likely to confirm that headline inflation is on track to return to the 2 per cent target shortly, which should give the Bank the green light to cut rates,” he said.

Philip Shaw, chief economist at Investec, said: “This broad direction illustrates that collectively the committee is moving gradually towards a rate cut. Despite it falling, experts suggested that two key economic indicators for the Bank – pay growth and services sector inflation – have remained more stubborn.Andrew Goodwin, chief UK economist for Oxford Economics, said: “The data published in mid-April for services inflation and private sector regular pay growth has likely extinguished any remaining hopes of a move in May.

Source: Loan Digest (loandigest.net)

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